Which type of budget includes forecasts for income statements and balance sheets?

The type of budget that includes forecasts for income statements and balance sheets is the pro forma budget. Pro forma budgets are forward-looking financial statements that provide estimates of future income and expenses, as well as projected financial positions. They help organizations anticipate future financial performance by projecting how income statements and balance sheets will look based on certain assumptions.

Specifically, a pro forma budget can guide strategic planning and decision-making by allowing organizations to visualize potential financial outcomes based on different scenarios. It is essential for assessing the financial viability of projects, investments, or business strategies.

Other budget types mentioned do not encompass both income statements and balance sheets in the same way. A cash flow budget primarily focuses on the cash inflows and outflows of an organization, emphasizing liquidity rather than overall financial health shown in financial statements. A capital budget focuses on long-term investment projects and capital expenditures, while an operating budget deals primarily with day-to-day expenses and revenues, typically reflecting the organization’s ongoing operations rather than comprehensive financial projections.